World View & Market Commentary. Forest first; Trees second. Focused on Real & Knowable facts that filter through the "experts" fluff and media hyperbole. Where we've been, what the future may hold and developing a better way forward.

Tuesday, September 1, 2009

Welcome to September, the month where school starts back up and any supposed “adults” return to Wall Street. Volumes will begin to pick up and it will make attempts to manipulate the market more difficult.

Equity futures are mostly down this morning after being higher last night, the NDX is only down very slightly, below are the DOW and S&P futures:

The dollar is up, bonds are down slightly, oil & gold are fairly close to even.

The Goldman ICSC reported same store sales came in down a greater amount year over year than the week prior, but it’s such a trumped up number that, again, I won’t even go there.

The Redbook is showing -4.1% yoy sales decreases which is a slight improvement over last week’s -4.4% reading.

And now a note on all these reports… I must say that it is BEYOND FRUSTRATING trying to make an intelligent judgment based on reports that are expressed in PLUS/MINUS percentages OR those that are expressed in INDEX VALUES. Here’s the problem with BOTH. Let’s say that the raw number of goods sold or goods produced last year during this week was $1 million. Under either reporting method, we don’t know that figure, they don’t tell us. All we know is that this year it’s +/- a percentage, so that this year over last it’s down 4.1%, but at what level of economic activity is it? If it collapsed the year prior, do we know if it’s truly recovered? Also, the percentages compound in either direction… this is like looking at a log scale chart and never being able to see the non-logarithmic scale. The index values are simply RETARDED and obviously meant to obscure. Sure, you can see that month to month a reading of 50 means “no change,” but if a reading of 51 means expansion, what if it follows a complete and total collapse? That would mean you have a slight blip up, but at an UNKNOWN level of economic activity. Attempting to chart such numbers is nonsense and this is a reason why statistic reporting needs to change and the raw numbers need to be made available to everyone along with how the data is collected and when.

ISM manufacturing INDEX and Construction Spending come out at 10 Eastern as does the pending home sales INDEX.

Is everything in the U.K. O.K.? Well, I see deleveraging and deflation…

Sept. 1 (Bloomberg) -- U.K. consumers repaid debt by the most on record in July and manufacturing unexpectedly contracted, indicating the economy’s path out of the worst recession in a generation will be uneven.

Net credit fell 217 million pounds ($353 million), the Bank of England said today, indicating households are paying down loans rather than increasing spending. That’s the most since at least 1993. A separate report based on a survey of factories fell to 49.7 in August from 50.2 in July, said the Chartered Institute of Purchasing and Supply and Markit Group Ltd.

Signs that consumers’ 1.5 trillion-pound debt burden is limiting their willingness to spend suggest the Bank of England’s policy of stoking growth with bond purchases will be slow to bear fruit. Deputy Governor Charles Bean said Aug. 25 the lag between purchases and more spending may be “quite long” and business investment slumped the most in 24 years in the second quarter.

Today’s figures are “a bit of a setback,” said James Knightley, an economist at ING Financial Markets in London. “There are worries about the sustainability of the recovery.” While repaying debt is “positive for household balance sheets in the medium to longer term,” it’s “not good news for near- term spending.”

The pound fell 0.7 percent to $1.6234. The yield on the 10- year gilt was little changed at 3.529 percent.

There you have it. Debt saturation. Despite attempts to cram more “credit” into the system, it just doesn’t work. The debt must be cleared.

If we get a down day in our markets today, it will be the first time in 3 months that we’ve strung together 3 down days in a row. McHugh is looking for a bounce in here as his count is still showing more of wave c up is due. For me to put my money on the line, I like all the stars to be in alignment – the fundamentals, technicals, and psychological. I think we’re very close to a top, but having one significant piece of the technicals say something different lowers the odds of the bet placed in the casino for me. Yes, there are signs of being WAY overstretched, like the percentage of stocks above their 50 day moving average, WAY outside of the norm.

Yesterday the 1,018 pivot actually held. Looks like we’ll open beneath it again. It’s important to watch these key levels and see how price behaves around them. Yesterday this pivot acted like a magnet and drew prices to it, both from above and from below. Watch that today. The next higher pivot is at 1,041 and the next lower is at 990 with significant support also above 1,000. Get below 1,000 and now you may have something going on that discredits McHugh’s wave count. Until then, it’s all suspect to me.

Shorting the market is very difficult. The instruments you have to do so are VERY INEFFICIENT. Options can eat you alive – and the money is bled off to the market makers. The inverse ETFs will eat you alive – and the money is bled off to the market makers. Shorting directly is probably the most efficient, but is not leveraged unless you do so on margin – not smart and trading fees will bleed off your money to the market makers.

Thus, you need significant declines to pay for the cost of these instruments. SIGNIFICANT. Otherwise you are simply enriching the big players, and you know who they are. That’s my take, be careful and stack the odds in your favor before gambling in the casino.

Oh yeah, HEDGING is expensive and is usually a losing proposition that simply provides more fees to you know who.

REAL MARKETS are supposed to provide capital to companies who use that capital to produce REAL goods and services. The markets have overall degenerated into a manipulated gambling casino using funny monopoly money. This casino is owned and operated by the same people who own and operate the government. Know the game you’re playing.